High-Yield Energy Bonds Are Getting Crushed

On Monday, we
highlighted a report that said Josh Birnbaum, the ex-Goldman
trader who made big bets against subprime mortgages during the
financial crisis, was now targeting high-yield bonds.

But the concern surrounding the high-yield bond space is really
about one thing: energy bonds.

The energy sector comprises about 15% of the high-yield bond
market, and amid the decline
in the price of oil, concerns around some of this debt have
increased as companies see oil fall below what may be their
"breakeven" price of production.

In a note on Monday, Kevin Horan at S&P Dow Jones Indices
highlighted the following chart, showing that while there is
weakness in the high-yield bond space, this weakness is really
about high-yield energy bonds.

Through Friday, high-yield bonds as a whole were down about 3%
this month but still up 1% this year.

Meanwhile, high-yield energy bonds were down more than 8% this
month and more than 9.5% this year.